Intrinsic value of Northrop Grumman - NOC

Previous Close

$294.60

  Intrinsic Value

$394.19

stock screener

  Rating & Target

buy

+34%

Previous close

$294.60

 
Intrinsic value

$394.19

 
Up/down potential

+34%

 
Rating

buy

We calculate the intrinsic value of NOC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 51.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.17
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  24,508
  26,052
  27,659
  29,334
  31,078
  32,897
  34,795
  36,775
  38,842
  41,002
  43,258
  45,617
  48,084
  50,665
  53,366
  56,193
  59,153
  62,253
  65,500
  68,903
  72,469
  76,207
  80,126
  84,235
  88,544
  93,063
  97,803
  102,775
  107,992
  113,465
  119,207
Variable operating expenses, $m
 
  22,561
  23,876
  25,246
  26,673
  28,162
  29,714
  31,334
  33,026
  34,793
  36,639
  37,324
  39,343
  41,454
  43,664
  45,977
  48,399
  50,935
  53,592
  56,377
  59,295
  62,353
  65,559
  68,921
  72,447
  76,144
  80,022
  84,091
  88,359
  92,837
  97,536
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  21,315
  22,561
  23,876
  25,246
  26,673
  28,162
  29,714
  31,334
  33,026
  34,793
  36,639
  37,324
  39,343
  41,454
  43,664
  45,977
  48,399
  50,935
  53,592
  56,377
  59,295
  62,353
  65,559
  68,921
  72,447
  76,144
  80,022
  84,091
  88,359
  92,837
  97,536
Operating income, $m
  3,193
  3,491
  3,783
  4,088
  4,405
  4,736
  5,081
  5,441
  5,817
  6,209
  6,619
  8,293
  8,742
  9,211
  9,702
  10,216
  10,754
  11,318
  11,908
  12,527
  13,175
  13,854
  14,567
  15,314
  16,097
  16,919
  17,781
  18,685
  19,633
  20,628
  21,672
EBITDA, $m
  3,649
  4,854
  5,154
  5,466
  5,791
  6,130
  6,483
  6,852
  7,238
  7,640
  8,060
  8,500
  8,960
  9,441
  9,944
  10,471
  11,022
  11,600
  12,205
  12,839
  13,503
  14,200
  14,930
  15,696
  16,499
  17,341
  18,224
  19,150
  20,122
  21,142
  22,212
Interest expense (income), $m
  0
  247
  292
  339
  387
  438
  491
  546
  604
  664
  726
  792
  861
  932
  1,007
  1,086
  1,168
  1,254
  1,344
  1,439
  1,537
  1,641
  1,750
  1,864
  1,983
  2,108
  2,240
  2,378
  2,522
  2,674
  2,833
Earnings before tax, $m
  2,923
  3,244
  3,492
  3,749
  4,018
  4,298
  4,590
  4,895
  5,213
  5,545
  5,893
  7,501
  7,881
  8,279
  8,695
  9,130
  9,586
  10,064
  10,564
  11,088
  11,637
  12,213
  12,817
  13,450
  14,114
  14,810
  15,541
  16,307
  17,111
  17,954
  18,839
Tax expense, $m
  723
  876
  943
  1,012
  1,085
  1,160
  1,239
  1,322
  1,407
  1,497
  1,591
  2,025
  2,128
  2,235
  2,348
  2,465
  2,588
  2,717
  2,852
  2,994
  3,142
  3,298
  3,461
  3,632
  3,811
  3,999
  4,196
  4,403
  4,620
  4,848
  5,087
Net income, $m
  2,200
  2,368
  2,549
  2,737
  2,933
  3,137
  3,351
  3,573
  3,805
  4,048
  4,302
  5,476
  5,753
  6,043
  6,347
  6,665
  6,998
  7,346
  7,712
  8,094
  8,495
  8,916
  9,357
  9,819
  10,303
  10,812
  11,345
  11,904
  12,491
  13,107
  13,753

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,541
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  25,614
  24,531
  26,045
  27,621
  29,264
  30,977
  32,763
  34,628
  36,575
  38,608
  40,733
  42,954
  45,277
  47,707
  50,250
  52,912
  55,699
  58,618
  61,677
  64,881
  68,239
  71,758
  75,448
  79,317
  83,375
  87,630
  92,093
  96,775
  101,687
  106,841
  112,248
Adjusted assets (=assets-cash), $m
  23,073
  24,531
  26,045
  27,621
  29,264
  30,977
  32,763
  34,628
  36,575
  38,608
  40,733
  42,954
  45,277
  47,707
  50,250
  52,912
  55,699
  58,618
  61,677
  64,881
  68,239
  71,758
  75,448
  79,317
  83,375
  87,630
  92,093
  96,775
  101,687
  106,841
  112,248
Revenue / Adjusted assets
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
Average production assets, $m
  3,326
  3,543
  3,762
  3,989
  4,227
  4,474
  4,732
  5,001
  5,283
  5,576
  5,883
  6,204
  6,539
  6,890
  7,258
  7,642
  8,045
  8,466
  8,908
  9,371
  9,856
  10,364
  10,897
  11,456
  12,042
  12,657
  13,301
  13,977
  14,687
  15,431
  16,212
Working capital, $m
  1,226
  -1,407
  -1,494
  -1,584
  -1,678
  -1,776
  -1,879
  -1,986
  -2,097
  -2,214
  -2,336
  -2,463
  -2,597
  -2,736
  -2,882
  -3,034
  -3,194
  -3,362
  -3,537
  -3,721
  -3,913
  -4,115
  -4,327
  -4,549
  -4,781
  -5,025
  -5,281
  -5,550
  -5,832
  -6,127
  -6,437
Total debt, $m
  7,058
  8,339
  9,674
  11,065
  12,514
  14,024
  15,600
  17,245
  18,962
  20,755
  22,629
  24,589
  26,637
  28,781
  31,024
  33,371
  35,830
  38,405
  41,102
  43,928
  46,889
  49,994
  53,249
  56,661
  60,239
  63,993
  67,929
  72,059
  76,391
  80,936
  85,706
Total liabilities, $m
  20,355
  21,636
  22,971
  24,362
  25,811
  27,321
  28,897
  30,542
  32,259
  34,052
  35,926
  37,886
  39,934
  42,078
  44,321
  46,668
  49,127
  51,702
  54,399
  57,225
  60,186
  63,291
  66,546
  69,958
  73,536
  77,290
  81,226
  85,356
  89,688
  94,233
  99,003
Total equity, $m
  5,259
  2,895
  3,073
  3,259
  3,453
  3,655
  3,866
  4,086
  4,316
  4,556
  4,806
  5,069
  5,343
  5,629
  5,930
  6,244
  6,573
  6,917
  7,278
  7,656
  8,052
  8,467
  8,903
  9,359
  9,838
  10,340
  10,867
  11,419
  11,999
  12,607
  13,245
Total liabilities and equity, $m
  25,614
  24,531
  26,044
  27,621
  29,264
  30,976
  32,763
  34,628
  36,575
  38,608
  40,732
  42,955
  45,277
  47,707
  50,251
  52,912
  55,700
  58,619
  61,677
  64,881
  68,238
  71,758
  75,449
  79,317
  83,374
  87,630
  92,093
  96,775
  101,687
  106,840
  112,248
Debt-to-equity ratio
  1.342
  2.880
  3.150
  3.390
  3.620
  3.840
  4.040
  4.220
  4.390
  4.560
  4.710
  4.850
  4.990
  5.110
  5.230
  5.340
  5.450
  5.550
  5.650
  5.740
  5.820
  5.900
  5.980
  6.050
  6.120
  6.190
  6.250
  6.310
  6.370
  6.420
  6.470
Adjusted equity ratio
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,200
  2,368
  2,549
  2,737
  2,933
  3,137
  3,351
  3,573
  3,805
  4,048
  4,302
  5,476
  5,753
  6,043
  6,347
  6,665
  6,998
  7,346
  7,712
  8,094
  8,495
  8,916
  9,357
  9,819
  10,303
  10,812
  11,345
  11,904
  12,491
  13,107
  13,753
Depreciation, amort., depletion, $m
  456
  1,363
  1,370
  1,378
  1,386
  1,394
  1,403
  1,412
  1,421
  1,431
  1,441
  207
  218
  230
  242
  255
  268
  282
  297
  312
  329
  345
  363
  382
  401
  422
  443
  466
  490
  514
  540
Funds from operations, $m
  2,841
  3,731
  3,919
  4,115
  4,319
  4,531
  4,753
  4,985
  5,227
  5,479
  5,743
  5,683
  5,971
  6,273
  6,589
  6,920
  7,266
  7,629
  8,009
  8,407
  8,824
  9,261
  9,720
  10,201
  10,705
  11,234
  11,788
  12,370
  12,980
  13,621
  14,293
Change in working capital, $m
  28
  -83
  -87
  -90
  -94
  -98
  -102
  -107
  -112
  -117
  -122
  -127
  -133
  -139
  -146
  -153
  -160
  -167
  -175
  -184
  -193
  -202
  -212
  -222
  -233
  -244
  -256
  -269
  -282
  -296
  -310
Cash from operations, $m
  2,813
  3,815
  4,006
  4,205
  4,413
  4,630
  4,856
  5,092
  5,338
  5,596
  5,865
  5,810
  6,104
  6,412
  6,735
  7,072
  7,426
  7,796
  8,184
  8,590
  9,016
  9,463
  9,931
  10,422
  10,937
  11,478
  12,044
  12,639
  13,262
  13,916
  14,603
Maintenance CAPEX, $m
  0
  -111
  -118
  -125
  -133
  -141
  -149
  -158
  -167
  -176
  -186
  -196
  -207
  -218
  -230
  -242
  -255
  -268
  -282
  -297
  -312
  -329
  -345
  -363
  -382
  -401
  -422
  -443
  -466
  -490
  -514
New CAPEX, $m
  -920
  -217
  -219
  -228
  -237
  -247
  -258
  -269
  -281
  -294
  -307
  -321
  -336
  -351
  -367
  -384
  -403
  -422
  -442
  -463
  -485
  -508
  -533
  -559
  -586
  -615
  -645
  -676
  -709
  -744
  -781
Cash from investing activities, $m
  -805
  -328
  -337
  -353
  -370
  -388
  -407
  -427
  -448
  -470
  -493
  -517
  -543
  -569
  -597
  -626
  -658
  -690
  -724
  -760
  -797
  -837
  -878
  -922
  -968
  -1,016
  -1,067
  -1,119
  -1,175
  -1,234
  -1,295
Free cash flow, $m
  2,008
  3,487
  3,669
  3,852
  4,043
  4,241
  4,449
  4,665
  4,890
  5,126
  5,372
  5,293
  5,562
  5,843
  6,138
  6,446
  6,768
  7,106
  7,460
  7,831
  8,219
  8,626
  9,053
  9,500
  9,970
  10,462
  10,978
  11,519
  12,087
  12,683
  13,308
Issuance/(repayment) of debt, $m
  563
  1,281
  1,335
  1,390
  1,449
  1,511
  1,576
  1,645
  1,717
  1,793
  1,874
  1,959
  2,049
  2,143
  2,243
  2,348
  2,458
  2,575
  2,697
  2,826
  2,962
  3,104
  3,255
  3,412
  3,579
  3,753
  3,937
  4,130
  4,332
  4,545
  4,769
Issuance/(repurchase) of shares, $m
  -1,547
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,146
  1,281
  1,335
  1,390
  1,449
  1,511
  1,576
  1,645
  1,717
  1,793
  1,874
  1,959
  2,049
  2,143
  2,243
  2,348
  2,458
  2,575
  2,697
  2,826
  2,962
  3,104
  3,255
  3,412
  3,579
  3,753
  3,937
  4,130
  4,332
  4,545
  4,769
Total cash flow (excl. dividends), $m
  862
  4,768
  5,004
  5,243
  5,492
  5,752
  6,024
  6,309
  6,607
  6,919
  7,246
  7,252
  7,611
  7,987
  8,381
  8,794
  9,227
  9,681
  10,157
  10,657
  11,181
  11,731
  12,308
  12,913
  13,548
  14,215
  14,914
  15,648
  16,419
  17,228
  18,077
Retained Cash Flow (-), $m
  263
  -177
  -179
  -186
  -194
  -202
  -211
  -220
  -230
  -240
  -251
  -262
  -274
  -287
  -300
  -314
  -329
  -344
  -361
  -378
  -396
  -415
  -435
  -457
  -479
  -502
  -527
  -552
  -580
  -608
  -638
Prev. year cash balance distribution, $m
 
  2,541
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  7,133
  4,826
  5,057
  5,298
  5,550
  5,814
  6,089
  6,378
  6,679
  6,995
  6,990
  7,337
  7,700
  8,081
  8,480
  8,898
  9,336
  9,796
  10,279
  10,785
  11,315
  11,872
  12,456
  13,069
  13,713
  14,388
  15,096
  15,839
  16,620
  17,439
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  6,812
  4,382
  4,346
  4,286
  4,204
  4,099
  3,971
  3,821
  3,650
  3,461
  3,105
  2,901
  2,685
  2,461
  2,232
  2,002
  1,775
  1,553
  1,342
  1,143
  959
  792
  644
  514
  403
  309
  233
  171
  123
  87
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Northrop Grumman Corporation is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company's segments include Aerospace Systems, Mission Systems and Technology Services. The Company's Aerospace Systems segment is engaged in the design, development, integration and production of manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics and other systems/subsystems. The Mission Systems segment offers mission solutions and multifunction systems for Department of Defense (DoD), intelligence community, international, federal civil and commercial customers. The Technology Services segment provides logistics solutions supporting the full life cycle of platforms and systems for global defense and federal-civil customers.

FINANCIAL RATIOS  of  Northrop Grumman (NOC)

Valuation Ratios
P/E Ratio 23.4
Price to Sales 2.1
Price to Book 9.8
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 27.2
Growth Rates
Sales Growth Rate 4.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 95.3%
Cap. Spend. - 3 Yr. Gr. Rate 20.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 134.2%
Total Debt to Equity 134.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 8.1%
Return On Total Capital 18.2%
Ret/ On T. Cap. - 3 Yr. Avg. 16%
Return On Equity 40.8%
Return On Equity - 3 Yr. Avg. 31.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 23.6%
Gross Margin - 3 Yr. Avg. 23.6%
EBITDA Margin 13.8%
EBITDA Margin - 3 Yr. Avg. 13.9%
Operating Margin 13%
Oper. Margin - 3 Yr. Avg. 13.1%
Pre-Tax Margin 11.9%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 24.7%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 29.1%

NOC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NOC stock intrinsic value calculation we used $24508 million for the last fiscal year's total revenue generated by Northrop Grumman. The default revenue input number comes from 2016 income statement of Northrop Grumman. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NOC stock valuation model: a) initial revenue growth rate of 6.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.7%, whose default value for NOC is calculated based on our internal credit rating of Northrop Grumman, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Northrop Grumman.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NOC stock the variable cost ratio is equal to 86.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NOC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Northrop Grumman.

Corporate tax rate of 27% is the nominal tax rate for Northrop Grumman. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NOC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NOC are equal to 13.6%.

Life of production assets of 34.6 years is the average useful life of capital assets used in Northrop Grumman operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NOC is equal to -5.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5259 million for Northrop Grumman - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 174.1 million for Northrop Grumman is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Northrop Grumman at the current share price and the inputted number of shares is $51.3 billion.

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COMPANY NEWS

▶ Missile Defense, F-35 Will Be Hot Topics In Q3 Defense Earnings   [Oct-21-17 09:50AM  Investor's Business Daily]
▶ Northrop loses out to Raytheon again on billion-dollar cyber contract   [Oct-19-17 06:00PM  American City Business Journals]
▶ Northrop Grumman lands $13.4M contract, adding 450+ local jobs   [Oct-13-17 12:50PM  American City Business Journals]
▶ 5 Defense Stocks to Pick Ahead of Q3 Earnings   [Oct-11-17 02:50PM  Zacks]
▶ 3 Top Defense Stocks to Buy Right Now   [Oct-09-17 06:04PM  Zacks]
▶ [$$] Marvel Drops Joint Venture With Northrop Grumman   [Oct-08-17 06:53PM  The Wall Street Journal]
▶ Shoot for the Moon? Buy Aerospace Over Defense   [Oct-04-17 10:19AM  Barrons.com]
▶ Northrop Grumman Corporation (NOC) Goes All in on Orbital   [Sep-28-17 03:53PM  InvestorPlace]
▶ Northrop Grumman unveils leadership changes in wake of Orbital acquisition   [Sep-27-17 04:34PM  American City Business Journals]
▶ Northrop Grumman Announces Leadership Transitions   [Sep-26-17 05:00PM  GlobeNewswire]
▶ Trump: The largest tax cut in the history of our country   [Sep-25-17 01:53PM  Yahoo Finance Video]
▶ Asian stocks flat as investors await Fed meeting results   [Sep-19-17 11:45PM  Associated Press]
▶ Space Mergers and Streaming Stars   [06:30PM  Motley Fool]
▶ Company News For Sep 19, 2017   [09:58AM  Zacks]
▶ What Happened in the Stock Market Today   [05:03PM  Motley Fool]
▶ Nasdaq Turns Red Even As More Stock Breakouts Emerge   [02:41PM  Investor's Business Daily]
▶ Northrop Grumman to buy Orbital for $7.8 bln   [02:28PM  Reuters Videos]
▶ [$$] Northrop Grumman: fight club   [01:37PM  Financial Times]
▶ Aerospace and Defense ETFs Rocket Higher   [12:52PM  Barrons.com]
Financial statements of NOC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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